Third Quarter Expenditure Report 2010/11: Research Unit briefing

23 May 2011

Chairperson: Mr E Sogoni (ANC)

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Meeting Summary

The Committee received a briefing from the Parliamentary Research Unit on the third quarter expenditure report. The report provided a detailed overview of government spending for the period 1 April 2010 to 31 December 2010. It highlighted spending patterns and drew the attention of Parliament and the Executive to findings and recommendations made for improved public spending. The report gave a breakdown of the seven departments identified as the lowest spending, which were the Departments of Communications, Water Affairs, Rural Development and Land Reform, Public Works, Police, Women, Children and People with Disabilities and Statistics South Africa.
The majority of the Departments that reported had under spent with the exception of the Department of Higher Education which had spent 93, 4 percent of its budget. The reasons for under spending varied from one Department to another. The common thread that seemed to run through all the Departments was the high number vacancies in the management positions and the lack of technical expertise. This phenomenon then adversely hampered service delivery. Members concerns included the fact that some Departments did not clearly articulate the bottlenecks in spending patterns so that the Committee could facilitate solutions. The other concern was the use of acting staff with no real powers to make decisions.

Meeting report

The Chairperson mentioned that the Committee had been tasked to look at the strategic plan of the Department of Monitoring and Evaluation. The researchers had already gone through the strategic plan; members would also have a chance to look the document beforehand.
Briefing on 3rd Quarter expenditure ReportMr Phelelani Dlomo, Researcher, Parliamentary Research Unit, noted that the report provided a detailed overview of government spending for the period 1 April 2010 to 31 December 2010. It highlighted spending patterns and drew the attention of Parliament and the Executive to findings and recommendations made for improved public spending.

During the period under review, government spending had decreased by 0, 9 percent compared to the same period in 2009/10. Closer scrutiny revealed that stricter monitoring systems should be put in place to strengthen budget implementation.

The expenditure of the national departments reflected slow spending. Most of the funds in the departments were intended for the entities. The transfer of funds to the entities was executed by the receiving entities and accounted for in terms of their accountability instruments. It should be noted that the funds were not always used for the intended purposes. All the departments reported different expenditure patterns, with the Department of Higher Education and Training reporting the highest expenditure (93,4%) and the Department of Communications the least spending department at 45, 1%.

Mr Dlomo replied that departments were very slow in spending allocations. This hampered service delivery and often led to fiscal dumping. An effective monitoring system would ensure that departments spend their funds timeously. Currently, the only Department that had spent its funds correctly was the Department of Higher education.

The Chairperson suggested that departments should provide the Committee with regular reports on spending.

Mr J Gelderblom (ANC) suggested that officials could set deadlines that would guide the departments on when to submit reports to the Committee.

Ms R Mashigo (ANC) pointed out that the problem with some departments was the use of acting senior managers with no real powers to make important decisions.

Mr Dlomo noted that seven departments had been identified after considering government priorities and spending patterns.

Department of Communications (DoC)
The DoC was allocated a total budget of R2,1 billion in the 2010/11 financial year. The Department reported an expenditure of R965 million or 45, 14% at the end of the third quarter. The Department had indicated that the reason for the slow spending was mainly due to the high vacancy rate that came about as a result of a organisational review and a moratorium on the filling of senior posts. Furthermore, there were delays in the implementation of projects due to instability, especially in the Department’s Bid Committee but that it had since been addressed. The introduction of key internal controls also resulted in slow expenditure within the Department.

The Chairperson suggested that the relevant parliamentary committees needed to engage with national departments about their under spending. Departments had to explain why vacancies were not being filled as the President had given them six months to address this in the State Of The Nation Address.

Department of Water Affairs (DWA)The DWA was allocated a budget of R8,2 billion in the 2010/11 financial year.Mr Dlomo mentioned that the DWA had under spent because there was a lack of technical and management capacity and no common understanding on how to spend conditional grants. The Committee had requested the Department to submit a detailed report on how the Masibambane funds had been spent. The Department replied that the reasons for the slow spending was due to the lack of expertise in municipalities and the delays in appointing mechanical and technical contractors. Other reasons included the incorrect submission of payment certificates. The Department had undertaken to reduce the vacancy rate by ten percent before the end of May 2011.
The Chairperson noted with concern the overarching problem caused by the high vacancy rate in most departments under review.

Department of Public Works (DPW)The DPW was allocated a budget of R7,3 billion in the 2010/11 financial year. The Expanded Public Works Programme (EPWP) showed the slowest under spending in the Department. Some of the reasons for this included the late awarding of bids and the lack of the capacity to manage projects. The Committee noted a lack of integrated planning between the Department, Provinces and Municipalities which then resulted in slow service delivery. A planning Committee involving all three spheres of the government had been set up to address this.

The Committee voiced concern about the slow spending on the EPWP given its potential to deliver jobs. Members felt that the Department should help smaller municipalities that had no expertise.
Department of Police The Department of Police was allocated a budget of R53, 5 billion in the 2010/11 financial year. It had managed to spend 72, 8% of its allocation by the end of December 2010.The slow expenditure was ascribed to the Integrated Justice System (IJS) and the Criminal Justice System

The Committee was concerned by the lack of co-operation by the role players in the Justice Cluster. There was a need for collaboration amongst the officials at all levels within the cluster.

Department of Rural Development and Land ReformThe Department of Police was allocated a budget of R7, 3 billion in the 2010/11 financial year. The Department attributed the slow expenditure to the restructuring process to align its organisational structure and resources to the mandate and the moratorium on the filling of vacant posts, which had been lifted at the beginning of 2011. The funds earmarked for other programmes were shifted to land restitution used to settle high number of court cases court cases.

The Committee would look at the issue of shifting of funds and discuss this with Treasury.

Statistics South Africa (StatsSA)The entity was allocated a budget of R2, 1 billion in the 2010/11 financial year. The under spending by StatsSA was mostly attributed to the fact that the census would be held in October 2011, and it would mean a roll over even though the funds had already been allocated. The Committee was concerned with the rollover.

Department of Women, Children and People with DisabilitiesMr Dlomo outlined the Committee’s concerns, which were mainly related to teething problems since the Department was new. Issues such as office space because previously the office was situated in the Presidency before it was a fully fledged Department. Other challenges were related to capacity. The Committee was also concerned with the high spending patterns related to goods and service and the high cost of international travel and advertising. Members expressed great concern that the Department was not able to report on its spending patterns to the National Treasury on a monthly basis as required by the Public Finance Management Act (PFMA).

National TreasuryThe National Treasury was allocated a budget of R50, 2 billion in the 2010/11 financial year. The National Treasury had under spent its budget due to slow spending in the municipalities on capital projects. There were delays in procurement and the drafting of contracts. Some provinces were not meeting the required criteria and a limited number of technical consultants and the high vacancy rate of qualified accountants due to competition with the private sector.

The Committee felt that Treasury should monitor the expenditure of grants more closely.

Mr Dlomo explained that municipalities did not have enough capacity to implement programmes that were funded by the Neighbourhood Development Partnership Grant (NDPG) as stipulated by the Treasury. He cited an example of logistics and planning stage expenses, which were not catered for in the conditional grant. The grants ended up not being utilised.

The Chairperson suggested that the division of revenue should prescribe funds for things such as logistics and planning. The Committee would facilitate a meeting between the Treasury, Provinces, and Municipalities to explain how funds should be utilised. No conditional grants money should be rolled over twice.

The Chairperson noted that some information had been omitted in the Findings and instructed the research team to work on the document overnight as the Committee hoped to adopt it the next day.